Black Friday weekend spending drop pressures U.S. profit

The first spending decline on a Black Friday weekend since 2009 reinforced projections for a lackluster holiday, increasing chances retailers will extend the deep discounts already hurting their profit margins.

Purchases at stores and websites fell 2.9% to $57.4 billion during the four days beginning with the Nov. 28 Thanksgiving holiday, according to a survey commissioned by the National Retail Federation. While 141 million people shopped, about 2 million more than last year, the average consumer’s spending dropped 3.9% to $407.02, the survey showed.

The survey results, if borne out at cash registers in American malls and on website checkout screens, herald retailers’ likely return to Black Friday-type discounts this week and suggest added stress for several chains. Wal-Mart Stores Inc. and Target Corp. already cut profit forecasts after tepid sales gains in back-to-school shopping. While the NRF reiterated its forecast yesterday that total sales in November and December would increase 3.9%, the trade group has said it would revise the forecast if necessary later this month.

“Retailers didn’t get what they wanted from Black Friday and they will need to make it up in the next three weeks,” Poonam Goyal, an analyst for Bloomberg Industries, said in an interview. “There will be some panic sales.”

While U.S. stock markets have reached all-time highs and housing prices have rebounded in several markets, many Americans still face stagnant wages and inconsistent job growth. Confidence among U.S. consumers, whose spending makes up about 70% of the nation’s economy, declined in November to a seven-month low, according to the Conference Board.

“Consumers are generally not in a great mood, feeling very uneasy about the economy and their jobs, and are looking for value this year,” Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, wrote today in a note to clients. “They have their list and will check it twice, but they are not going to the mall and grabbing a bunch of random stuff because it is on sale or looks nice.”

Stores have started holiday promotions earlier since the last recession ended in mid-2009 -- even pushing into October -- to try to capture consumers’ first purchases and encourage them to part with more dollars beyond the day’s big deal. Sales in November and December account for 20% to 40% of U.S. retailers’ annual revenue and 20% of profit, according to the Washington-based NRF.